ESG

Disclosures with regards to (EU) 2019/2088

Table of Revisions according to Art.12 (EU) 2019/2088

Date

Article

Explanation of Amendments

10.03.2022

Art.3 (EU)/ 2019/2088

Initial Publication

10.03.2022

Art.5 (EU)/ 2019/2088

Initial Publication

01.08.2022 Art. 3 (EU)/2019/2088

Update of the explanations on the consideration of sustainability risks and sustainability factors due to the Delegated Directive (EU) 2021/1270 amending Directive 2010/43/EU (with regard to UCITS) and Delegated Regulation (EU) 2021/1255 amending Delegated Regulation (EU) No. 231/2013 (with regard to alternative investment fund managers).

01.01.2023   Art. 4 (EU)/ 2019/2088 Update regarding the consideration of principal adverse impacts on sustainability factors at entity level of VP Fund Solutions

Sustainability risk integration in investment decisions (Art. 3)

Disclosure pursuant to article 3 of Regulation (EU) 2019/2088

Introduction

This information shall provide an overview of how VP Fund Solutions defines and considers sustainability risks and how these are integrated into investment decision making processes.

Sustainability Risks

A sustainability risk is defined as an environmental (E), social (S) or corporate governance (G) event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of an investment. In principle, it should be noted that sustainability risks do not represent an independent risk category, but are subsumed under the existing, classic risk types. Sustainability risks can therefore have a negative impact on future business performance at company level as well as reduce the value of investments within the managed funds.

Consideration in investment decision making processes

Sustainability risks are considered to the extent required by law and within the framework of the respective applicable investment policy of the funds. The way in which sustainability risks are included in investment decisions is set out in the pre-contractual documents of the respective funds.

Consideration within VP Bank funds

For the VP Bank funds, VP Fund Solutions is guided by the sustainability strategy of VP Bank Group within the framework of the respective fund's investment policy (https://www.vpbank.com/en/private-clients/investing/sustainable-investing-vp-bank).

As part of the funds' respective investment policies, investments that pose an unacceptably high sustainability risk are excluded. Investments must meet minimum criteria in the following three areas: ESG rating, business operations and business practices. Investments that do not meet these minimum criteria will be excluded. Information for this assessment is provided by a third-party ESG data provider. Below is a summary of the requirements:

 

ESG-Rating

The ESG rating consists of the key ESG factors for each industry. The ratings range from AAA (best rating) to CCC (worst rating) compared to industry peers. The two lowest rating levels, B and CCC, are excluded. For third-party funds and ETFs, a minimum level of MSCI coverage is required and only a limited number of B and CCC-rated investments are allowed. The permissible thresholds depend on the region and its structure

 

Business practices

Business practices refer to the behaviours of enterprises. VP Fund Solutions is guided by three internationally recognised standards: "UN Global Compact", "United Nations Guiding Principles for Business and Human Rights" and "International Labour Organization (ILO) Labour Standards". Stocks and bonds of companies that breach these international standards or have a "very severe" controversy as identified by MSCI are excluded. In the case of third-party funds and ETF recommendations, there may a very low share of investments with breaches of international standards and «very severe» controversies.

 

Business activity

Business activity refers to the products and services that a company offers. "Critical" business areas are defined as tobacco, gambling, thermal coal, nuclear and controversial weapons.  Companies that generate their revenue from these critical business areas above defined thresholds are excluded. Third-party funds and ETFs may contain a very small proportion of companies operating in areas considered «critical».

 

Assessment scope

Sustainability risk assessment is conducted on all financial products unless they are not considered investments or financial instruments or only provide an economic exposure. Such as:

 

  • Cash products (Money Market / Credit, Limit, Balance, money market deposit)
  • Forwards, Options, Futures

 

How this is applied

The above criteria are implemented in relevant investment systems and processes. Investments are monitored on an ongoing basis to ensure that the criteria are met.

Consideration on entity level

In order to ensure adequate identification, monitoring, management and limitation of sustainability risks, VP Fund Solutions takes sustainability risks into account as a whole in its business model, strategy, governance and risk management process. Sustainability risks are analyzed, documented and any necessary options for action are derived from them.

Principal Adverse Sustainability Impact Statement (Art. 4)

At entity level, VP Fund Solutions exercises its voting right  under Article 4(1)(b) SFDR and does currently not consider any adverse impacts of investment decisions on sustainability factors. Due to the nature of the entity's business model the investment decision is usually delegated to third parties and the data quality and quantity required to consider principal adverse impact indicators varies depending on the asset class. VP Fund Solutions intends to closely monitor the industry going forward and updates its approach in due course as the position evolves and further regulatory guidance is made available.

Whether, and if so how, principal adverse impacts on sustainability factors are considered at the level of a financial product is determined by the information provided in the pre-contractual information and periodic reporting of the respective financial product.

Remuneration policy (Art. 5)

For the disclosure under Article 5 Regulation (EU) 2019/2088 regarding the transparency of the remuneration policy in relation to the integration of sustainability risks, please refer to the remuneration policy of VP Fund Solutions

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